May 13 (Bloomberg) -- John Grayken, the billionaire founder
of Lone Star Funds, will invest $350 million of his own fortune
in the company’s latest fund targeting distressed assets across
the U.S., Europe and Japan.

The Dallas-based private-equity firm expects to raise about
$7 billion for Lone Star Fund IX, according to the minutes of a
March meeting of the New Mexico Educational Retirement Board, or
NMERB. Grayken’s contribution will be the most he’s invested in
one of his firm’s funds and will top the $330 million he placed
with a separate property fund last year.

Grayken, 57, is putting chunks of his own fortune on the
line as he scours the globe for distressed assets in the wake of
the financial crisis. The investments may lure outsiders to
follow him and put money in Lone Star’s funds, the latest of
which is focusing on non-commercial real estate loans and
“asset rich” financial companies.

“We always like to see a substantial investment by the
general partner of any fund,” said Bob Jacksha, Santa Fe-based
chief investment officer of the NMERB, which manages about $10.7
billion of teachers’ pensions in New Mexico. “It helps promote
a healthy alignment of interest.”

Jed Repko, a spokesman for Lone Star, declined to comment.

The NMERB agreed to invest $100 million in Lone Star Fund
IX, according to the minutes. Other investors include the Oregon
state pension fund, which will put in $300 million, according to
an April 30 statement.

Money Raised

The Lone Star IX fund has raised $5.3 billion so far,
according to a filing last month with the Securities and
Exchanges Commission. The total amount raised so far is closer
to $5.7 billion, Dow Jones reported last month, citing a person
familiar with the matter.

“The strategy is to take advantage of the regulatory
requirements in the banking sector and the deleveraging in the
U.S. and Europe,” according to the NMERB minutes. “They feel
this will continue to provide investment opportunities over the
next several years.”

Lone Star will spend 40 percent of the cash raised on
assets in the U.S., 50 percent in Europe and 10 percent in
Japan, according to the NMERB minutes. The company’s investments
since the financial crisis include Irish property debt and
German financial firms.